Online Travel Sites' Dirty Little Secrets

The next time you find yourself on a travel website, ask yourself if you're getting the best deal.

On the surface, it certainly seems that way. Priceline.com's (PCLN) William Shatner pops up to let you know that the fast-growing website is scouring competing rates to serve up the biggest bargains. And how can the Travelocity lawn gnome steer you wrong?

These days -- especially when most of the major websites have eliminated the booking fees that savvy travelers could have sidestepped by booking directly -- there is absolutely nothing wrong with leaning on traditional travel portals.

However, it's important to be careful and thorough to make sure that you're getting the most bang for your buck.

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The truth about travel portals

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Online Travel Sites' Dirty Little Secrets

Let's go over a few of the things that Priceline, Travelocity, Expedia (EXPE), and Orbitz Worldwide (OWW) would probably prefer that you don't know.

1. No portal offers every available option. Southwest Airlines (LUV) prides itself on its low fares. And since it's one of the few major carriers that won't hit you with fees on your first two pieces of checked baggage, a great rate can get even better compared to legacy airlines charging as much as $120 for two bags.

However, you won't find Southwest in the list of vetted flight results through most portals. Southwest's low-overhead approach and desire to have passengers deal directly with the airline make it a surprising omission.

You'll never see the portals spell out which carriers are outside of their search scope. It would only encourage visitors to crack open a new browser window and check those rates directly.

Things get even more limiting when it comes to lodging. Most of the major chains are refreshingly represented, but what about small inns, cozy bed-and-breakfast establishments, and the growing number of vacation properties that are showing up on HomeAway (AWAY) or Airbnb?

2. Traditional travel sites will never tell you to wait. Microsoft's (MSFT) Bing has an interesting treat for those kicking the tires of its travel portal. Bing Travel offers what it calls Price Predictor on flight searches. It offers a five-point system that lets travelers know if rates are likely to head higher, lower, or stay the same.

Bing claims that Price Predictor will save customers over $50 on a typical round trip. A third-party audit of its predictive technology claims that the gauge is accurate about 75% of the time. Analyzing weekly pricing patterns, industry moves, and availability make it a reasonable call to make.

Why aren't all of the portals following the lead of Bing's comparison-shopping engine? Well, think about it. Portals pride themselves on what they initially called a "bookers to lookers" ratio. They want to seal the deal, before you change your mind and head off to other websites or have a change of heart with your travel plans. They would lose plenty of sales by telling travelers to wait a few days, even if they would earn gobs of trust in return.

3. Booking directly still has its advantages. Travel portals are as popular as ever. Priceline reported blowout quarterly results this week. Revenue climbed nearly 36% in its latest quarter, and earnings soared 58% higher. Through its several global websites, Priceline arranged $21.7 billion in gross bookings last year. If you think that's a lot, consider that market leader Expedia scored $29.2 billion in global gross bookings in 2011.

Both companies are growing at brisk double-digit percentage clips, so obviously it's not as if their shortcomings are scaring consumers away. Priceline's "name your own price" option offers knowledgeable travelers the ability to take a stab at a low rate. For those with a little less sense of adventure, but still open to a little mystery in exchange for a deal, Expedia's Hotwire may be just the ticket.

However, few lodging deals may be as sweet as calling up the actual hotel you wish to stay at and trying to negotiate a daily rate directly.

4. Travel portals need to up-sell you. A few years ago, smart travelers would scour the travel portals -- and comparison-shopping sites such as Kayak that may throw out wider nets -- and then head off to the actual websites to complete the transaction. Traditional portals were charging $5 to $10 in airline booking fees to offset carriers that were slashing commissions.

We're in fairer times now. Most portals have done away with booking fees. They make it easy to add frequent flier membership numbers and select seats. However, this doesn't mean that the playing fields are finally level.

Websites still have bills to pay. Start checking out after finding the perfect flight through Priceline and you'll be asked if you want to buy travel protection insurance. No? How about a place to stay? No? Will you need a car while you're away? No?
Even Kayak and Bing Travel can get in your face with third-party ads. They do link directly to travel sites, so that's a plus, but it pays to be a disciplined online travel shopper.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, HomeAway, priceline.com, and Southwest Airlines, as well as creating a bull call spread position in Microsoft.